Existing home sales fell in December to the lowest level in more than a decade as higher mortgage rates cause turmoil in the housing market.
Home sales in December slowed 1% to a seasonally adjusted annual rate of 3.78 million, the National Association of Realtors reported on Friday, as higher mortgage rates priced out would-be buyers and led many homeowners to avoid selling and having to reenter the home loan market.
Sales of existing homes in December were at the lowest level since August 2010.
The pace of home sales is down 6.2% from the year before.
Total housing inventory at the end of December was 1 million units, down 11.5% from November but up 4.2% from a year ago.
The median price of an existing home in November was $382,000, an increase of 4.4% from the year before. Additionally, homes typically remained on the market for 29 days in December, up from 25 days in November.
The Federal Reserve’s mission to quash inflation by hiking interest rates has roiled the housing market. When the Fed’s target rate rises, or even when it is anticipated it will rise, mortgage rates tend to move higher.
The Fed’s hikes came after a historic period of interest rates being near zero due to the pandemic. The resulting dynamic saw mortgage rates move from historic lows, spurring an explosive housing market, to the highest level they have been in two decades, quickly crushing the housing market.
The average rate on a 30-year, fixed-rate mortgage is 6.89%, according to Mortgage News Daily, which tracks daily changes in rates. That is down from a recent peak of above 8% but is still much higher than in pre-pandemic years.
There has been a bit of an imbalance between new and existing home sales. That is because many people with existing homes are holding on to the ultralow mortgages they got during the pandemic, putting more pressure on the market for new homes.
New home sales fell on a monthly basis in November but are still higher than in November 2022. The December new home sales data are set to be released next Thursday.
Mortgage rates are expected to fall this year when the Fed begins cutting interest rates. Investors are pricing in up to six rate cuts in 2024, a scenario that would be good for those looking to purchase a home.
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Also this week, in some good news for the housing market, housing starts ticked up a bit.
Housing starts, the change in the number of new residential buildings that began construction, rose 1.9% from November to this past month, according to a Thursday report from the Census Bureau. From December 2022, they rose by 6.1%.